Amazon has bumper Diwali plans for India

Amazon is set to make its nationwide debut in online food retailing in India during the Diwali season, according to several people with knowledge of the plan. The company, which will make its entry through subsidiary Amazon Retail India Pvt Ltd, subsequently plans to start a private grocery label in India as it has done in the US.

The move is being keenly watched as it’s expected to trigger a price war with organised brick and-mortar retailers and online grocery companies, given the US company’s aggressive pricing strategy.

Amazon recently got government approval for stocking and selling food and groceries in India online and through brick and-mortar stores.

The company plans to invest $500 million in the segment over the next five years.

Company yet to decide on storesIt aims to sell locally produced and packaged food products from third parties and under its own private label.

It currently offers food products in some Indian cities through Amazon Pantry from third-party sellers. It also offers same-day grocery delivery on its Amazon Now app through a tie-up with retailers such as Big Bazaar and Hypercity in some cities. It will now sell directly to consumers.

Amazon debuted its first private grocery label in the US last year with products including coffee and baby food. The private label items are sold exclusively through Prime membership in the US and are priced lower than other popular brands. As it expands the grocery business in its home country, it will also open offline Amazon Go stores that will offer customers a checkout-free experience through technology.

The government is keen that Amazon open brick-and-mortar stores in India but the company is yet to decide on this, said a person aware of the development. “I don’t think there is any immediate plan,” said the person. The company spokesperson repeated that it will not comment on future plans when asked about this.

Such a move is a matter of time, one expert said. “Companies have to think of retail as an integrated activity,” said Devangshu Datta, chief executive of retail consultancy firm Third Eyesight. “Customers are going everywhere. If you are a multi-product, multi-brand company you have to be in present in multi-format. It is just a question of time that Amazon sets up a physical store.”

Chief executive of a retail firm that operates in the grocery and food segment said that most multinationals will find it difficult to make money in food retail because their compliance standards will add enormously to costs.